Qatar Airways CEO hits back at comments made by association of European Airlines Secretary General

11th Feb 2011

Qatar Airways Chief Executive Officer Akbar Al Baker today hit back at comments made by the Secretary General of the Association of European Airlines about the dramatic rise of Gulf carriers and their impact on the global aviation industry.

The boss of the Doha-based carrier said comments made by Ulrich Schulte-Strathaus at a recent gathering of the International Aviation Club in Washington DC were “factually incorrect and unfounded”.

Al Baker said: “I recently came across the remarks made by a colleague of ours, Mr Schulte-Strathaus, Secretary General of the Association of European Airlines, about how global competition needs to be addressed by the International Civil Aviation Organisation, similar to what the industry is calling for in the domain of the environment.

“Mr. Schulte-Strathaus focused on the competitive pressure that airlines from the Gulf are posing on their counterparts elsewhere. Usually I would choose not to comment directly on calls to find ways to limit the growth of the Gulf carriers, including Qatar Airways.

“However, because Mr. Schulte-Strathaus chose to address one of the august forums of aviation visionaries in the world, I thought I needed to put the record straight. Mr. Schulte-Strathaus in his remarks included a number of “facts” which I beg to disagree with. The so-called facts that he alluded to were as follows:

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1 - The geographical proximity of Doha, Dubai, and Abu Dhabi gives rise to an anomaly in aviation. The fact of the matter is that it is quite common to have a multitude of hubs in close proximity: Singapore and Kuala Lumpur; Paris, Amsterdam, and London; Frankfurt, Zurich, and Vienna; the airports of New York and so on.
Therefore, having three major hubs within a 280 miles radius is not a novelty in aviation.

2 - Mr. Schulte-Strathaus raises the issue that the governments of the UAE and Qatar consider the airlines of the Gulf as part of national strategy and as a “tool of a vertically integrated economic chain”. Again, he is trying to highlight a norm rather than an anomaly in the current geopolitical structure.
I would like to pose a question to Mr. Schulte-Strathaus: Can he tell me of any country of the world which does not consider its air transport industry, be that an individual airline or a multitude of them, as part of national interests? Was it not the case that the US government provided its airlines with cash outlays and tax breaks, as well as war insurance subsidies after September 11 in order to ensure the continuity of the US air transport industry? Is it not the case even further that the position of the US has consistently been to preserve the national identity and ownership of the US airlines? And on the other side of the Atlantic, doesn’t Mr. Schulte-Strathaus consider the billions of Euros that are allowed under the EU laws to pump into airlines for “restructuring purposes” as a manifestation of the strategic national interest in supporting national airlines and what they represent economically and socially?

Doesn’t Mr. Schulte-Strathaus consider the control over the overwhelming majority of slots in a highly congested region as a lopsided support to national airlines against new entrants including airlines who are coming from airports where European airlines can operate freely without any reciprocity in terms of slots quality?

3 - Mr. Schulte-Strathaus is comparing the aircraft order book of Gulf airlines with that of the US carriers in the long-haul wide body arena as if those airlines plan to dump capacity. The comparison itself is extremely erroneous! The backbone of the US air transport industry is domestic operations. The portion of the capacity deployed internationally as a ratio of the total capacity deployed by the US airlines is minimal. Of course, geography and population spread requires such a structure.
The airlines of the Gulf operate from small countries and they are operating regionally in an area which is 3 times the size of the US, and internationally with a network that stretches across the globe. We operate with the minimum cost per seat mile in mind. We operate with the minimum environmental footprint in mind as well. The average age of our fleet is around 5 years only. We do not keep airplanes operating for 20 to 30 years. Therefore, you will find that in order to maintain the lowest cost in seat mile, and the greatest appeal to customers, our order book is higher than elsewhere because we maintain a young fleet.

This is not a new strategy. It has been applied extremely successfully by the airlines of the Asia Pacific. Asian airlines have almost the same fleet age and a comparable unit cost. Furthermore, some Asian airlines are still owned by governments and they are definitely part of the national interests of their countries. Yet, we do not see Mr. Schulte-Strathaus signalling them as part of the threat to the future of the aviation industry.

4 - Mr. Schulte-Strathaus goes further in saying that two of the Gulf airlines have never made a profit. First of all, I would like to ask him how does he know that since Etihad Airways and Qatar Airways are not publishing their financial reports as yet? But from the principle standpoint: If profit was the only reason why airlines buy airplanes, as he is insinuating, then the net result of buying new airplanes in this whole industry should have been negative during the last decade.

5 - The crux of the matter in what Mr. Schulte-Strathaus is saying lies in his remark that “these (Gulf) airlines are efficient, they have extremely low unit cost yet deliver consistently high service quality. They have clarity of vision and decisiveness of action. They also have the full and enthusiastic support of their domestic political institutions.” I couldn’t say that better! Is it a mistake to be efficient and to have a low unit cost? Is it wrong from governments to be supportive to their national interests? Is Mr. Schulte-Strathaus advocating that airlines which have high unit cost and do not deliver consistently high service quality should be protected from efficient low cost and high service airlines?

6 - Mr. Schulte-Strathaus is saying that we are driven by a “policy which is not compatible with that of the US, Europe, Australia, China, Canada, and so on.”
I’m really lost here! Most of these governments are signatories of the Agenda for Freedom brokered by IATA, which calls for free market access. In fact, even the Director General of IATA, Mr. Giovanni Bisignani, recently called upon the Canadian government to respect the liberal market access principle and avoid protectionism. Does Mr. Schulte-Strathaus advocate that this policy of liberalisation should only apply when his member airlines are the beneficiaries and not vice-versa?

7 - Mr. Schulte-Strathaus is requesting governments to prevent additional market access in the short term! Perhaps Mr. Schulte-Strathaus should also ask governments to forego liberalisation policies, deregulation and why not foregoing market economy and resort to protectionism, inefficiencies, cartel price fixing, and anti-consumer behaviour. Where would protectionism end if his calls are heeded by the governments? Isn’t it the right of any consumer to get access to the best prices and the best value for money?

8 - Finally, we have no problem whatsoever for ICAO to create a multilateral system along the lines of how the World Trade Organisation handles free trade. I would go even further: Why won’t we apply the WTO principles on aviation to ensure that first and foremost the rights of the consumers and free competition apply across the board?

If Europe is not investing enough in aviation infrastructure, and if Europe had developed a cost base which is becoming burdensome on some of its old establishments, and if Europe is not addressing the cost of its social safety-net in a way which maintains a competitive posture for its airlines, should then the European consumer be penalised by depriving him from cost efficient aviation services? And where does this protectionism end? Would the next target be the European low cost carriers because they managed to provide competitive services to the members of AEA? I believe the answer is clear.

The airlines of the Gulf operate from small countries and they are operating regionally in an area which is 3 times the size of the US, and internationally with a network that stretches across the globe. We operate with the minimum cost per seat mile in mind. We operate with the minimum environmental footprint in mind as well. The average age of our fleet is around 5 years only. We do not keep airplanes operating for 20 to 30 years. Therefore, you will find that in order to maintain the lowest cost in seat mile, and the greatest appeal to customers, our order book is higher than elsewhere because we maintain a young fleet.

This is not a new strategy. It has been applied extremely successfully by the airlines of the Asia Pacific. Asian airlines have almost the same fleet age and a comparable unit cost. Furthermore, some Asian airlines are still owned by governments and they are definitely part of the national interests of their countries. Yet, we do not see Mr. Schulte-Strathaus signalling them as part of the threat to the future of the aviation industry.

The European airlines were pioneers in a large number of areas. We in the Gulf airlines community have learnt a lot from them. They should accept competition and that the customer being in the driver’s seat.